Tuesday, August 25, 2009

PartyGaming Buys WPT

By Pauly
New York City

I read the news today, oh boy. Even John Lennon, if he were alive, would have to say, "Holy shit, Yoko! PartyPoker just bought the WPT."

If you have been underneath a rock during the last 24 hours or don't pay attention to press releases, here's the skinny.... Peerless Media Limited (a subsidiary of PartyGaming) outbid another group for the sale of the World Poker Tour Enterprises (WPTE). Peerless Media Limited are paying $12.3 million (in addition to another 5% depending on the revenues generated by other assets included in the deal).

The deal included $1 million up front in cash to the WPTE, which will eventually be funneled to pay off Gamynia Limited (a company associated with Playtech, who is the parent company of iPoker). The $1 million is a kill fee from the WPTE in order to back out of an original arrangement with Gamynia Limited/iPoker who originally bid of just a little over $9 million. Yeah, only a few weeks ago it appeared that the iPoker group would be the new owners of the WPT. However, at the last moment, the suits at PartyGaming executed a swift move to snatch the WPT out of their fingertips.

Did PartyGaming aka PartyPoker save the World Poker Tour? We'll have to wait and see the final results, but my initial gut reaction was that this deal will have a positive impact in the poker industry at some point down in the future.

Perhaps PartyGaming can infuse some much needed buzz and energy into the fledgling WPT. Buy-ins and prize pools have been down across the board over the last few years for a number of reasons. Some of those obstacles (such as the faltering economy, the UIGEA, and poker's waning popularity among hipsters) were beyond their control, however, many of the WPT's problems were generated by their own success and their own stubborness. Like many companies in the poker industry, the WPT grew too big, too fast, as their company exploded during the poker boom. I had many run-ins with WPT staffers during the pinnacle of their success who honestly acted like they created the poker boom. That was their elitist attitude and you either got in line or got the hell out of their way. That's how big they were at the time in 2005. Even I knew my place and stepped aside and kept my mouth shut.

Sadly, the success of the WPT went to the heads of the people in power and they were unable to make necessary changes and adapt to the new world order of poker in the wake of the UIEGA. They launched an online poker site which ended up a tremendous failure and sucked out a vast amount of financial resources.

Roughly at the same time, PokerStars launched a highly successful tournament circuit in Europe (the EPT) and used that model to expand to other booming regions in the world such as Latin America (LAPT) and the Asian-Pacific market (APPT). At that point, there wasn't much "world" tournaments in the WPT especially after France stiff armed them and said no more WPT events at the Aviation Club. In addition, the PCA and the WPT drifted apart and were no longer partners. When you have four events every year from the Bellagio which makes up almost 1/3 of your schedule, you're actually running the Bellagio Poker Tour. Meanwhile, PokerStars continued their successful expansion.

The current WPT stops in Europe are not controlled by the WPTE. They sold off the franchise rights to outside entities who put on the tournament individually, even though it's being run under the WPT brand name. For example, Chili Poker was the sponsor of the WPT stop in Morocco.

I can only assume that PartyPoker saw an opportunity to use the WPT brand name to build up a stronger presence in Europe to possibly rival PokerStars' EPT. That's a positive thing for the poker industry because competition is a healthy thing. It will force the EPT to step up and improve some of their weaker points. However, it is interesting to note that PokerStars is the current sponsor for the current season of the WPT.

Meanwhile, business as usual will continue with the fledgling WPT in North America. I'm assuming that the move to purchase the WPT was more of a gamble (or hedge depending on how you view the gaming industry or the financial world) for PartyGaming. They're obviously waiting to return to the American market after they took a conservative approach after the UIGEA and left. They even volunteered to pay the Department of Justice a lump sums of cash for their wrong doing.

There have been whispers and conspiracy theories about of a secret union between PartyGaming and Harrah's (aka Caesar's Entertainment). All you have to do is look at the hiring of Mitch Gerber (former PartyGaming CEO) whose task included taking control of expanding the brand of the WSOP and www.worldseriesofpoker.com.

At this point, PartyGaming's strategy is fairly obvious... wait until both the economy improves and online poker returns to the American market. And if both happen at roughly the same time, they will be in an extremely advantageous position.

Just one year ago, I had sources in Europe telling me that Full Tilt Poker was on the verge of buying the WPT. All signs indicated that they were interested and infused a nice chunk of capital towards WPT's which secured them some promotional branding during the show. At the time I was in London and I recall having a conversation with an British industry insider who suggested, "Why doesn't Full Tilt just buy the whole bloody thing?"

And that whole bloody thing he was referring to was the WPT. Well, just a few weeks ago, it looked like the iPoker network was about to step in but now it's PartyGaming.

Do you remember back to 2005 when Doyle Brunson was rumored to be a part of a group who was seeking to buy WPT for $700 million? Nothing ever came of it, but the stock blew up on rumors of Texas Dolly trying to buy it. The SEC investigated Texas Dolly to see if there were any shenanigans in is involvement. Was his interest in buying legitimate or was it an old fashioned "pump and dump" scheme in order to boost up the price of WPTE?

$700 million is nothing like $12.3 million. Oh, the mighty have fallen. PartyGaming swooped in at the last moment and outbid their competitors to gain access to WPT, which at one time, was considered the premiere poker circuit in the world. They paid chump change when you think about how much rake they generate on a daily basis.

The last few years have been nothing short of a nightmare for WPT execs ever since the UIEGA hit. They have been under a constant siege of problems including juggling hostesses, the removal of Linda Johnson as emcee, switching channels (from the Travel Channel to the Game Show Network to Fox Sports) and whispers that Vince Van Patten and/or Mike Sexton were about to be bounced. Heck, they are not even on the sidelines for the final tables like they used to be. They just insert their commentary during the post-production process. The WPT used to be a major staple of televised poker viewing. Much like Monday Night Football, you used to know that Wednesday nights were dominated by the WPT on the Travel Channel. Once that union was dissolved, the WPT has been floating in limbo and they lost a significant amount of loyal viewers during their search for a new home.

Even the number of participants in the WPT have been way off this season. The Bellagio Cup numbers were anemic and the latest stop for the Legends of Poker also represented a 25% decrease in numbers. Even the Borgata in Atlantic City decided to drop the $10,000 buy-in event for the 2009 Borgata Poker Open and settled on a $3,300 + $200 buy-in (scheduled for September 19th). The gang at the Borgata understand the current marketplace and were not about to let the WPT's standardized $10,000 buy-in put a blemish on their amazing series.

It is also interesting to note that the cash raised from the sale of the WPTE will not be disbursed among the shareholders, even though the shareholders approved of the sale. The bigwigs at the WPTE will be using that cash to develop ventures outside of the poker and gaming industry.

Maybe they should have called Texas Dolly's bluff in 2005 and sold the WPT for $700 million? For now, $12.3 million is the price tag for something that used to be one of the most recognizable brands in poker.

Original content written and provided by Pauly from Tao of Poker at www.taopoker.com. All rights reserved. RSS feeds are for non-commercial use only.

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